For the year 2012 the S&P 500 Index returned 16% and the market's gain has continued in 2013 with the S&P 500 increasing over 5% in January. If there is truth to the market adage of "so goes January, so goes the rest of the year," the balance of 2013 will be rewarding for equity investors. According to the Stock Trader's Almanac, since 1950, stocks have finished lower for the year only three times after posting gains in January. The January effect has been correct 89% of the time since 1950, suffering only seven major setbacks.
As noted in our Investor Letter, and as we analyze the capital markets and project expected long-term returns and risks, at HORAN we believe we are in an environment that favors equities and alternative investments over bonds. Two components of risk, inflation risk and interest rate risk, give us concern about the prospect of positive real returns in diversified fixed income portfolios. Potential short-term shocks like the debt ceiling debate and sequestration in Washington may be catalysts for an equity market pullback. In our Investor Letter, we attempt to outline our case that supports equities over the longer term.
The complete Letter can be accessed directly from our website at this link: 4th Quarter Investor Letter.
|From The Blog of HORAN Capital Advisors|